America is at a crossroads. We sit here on the edge of a fiscal cliff fighting to determine if tax hikes or entitlement reform is going to lead the day. As we fight to raise our debt ceiling critical questions are not being answered and seem to be ignored time and time again. How did we get here? Why did we get here? And how do we avoid getting here again?
When we rescued two of the three American car companies we did so by removing huge debt and the liabilities of their underfunded pension liabilities. Did we address why they were all failing to begin with? Were VW, BMW, and Mercedes in Germany rescued? Did Japan step in to support Toyota, Honda, Nissan, Subaru or Mitsubishi. There are concrete reasons why two thirds of the American auto industry was failing. The truth is that America’s other smaller industries are just as affected but don’t have the glitter and prestige of the auto industry. Many have already disappeared.
Unfortunately, the hidden statistic that never reaches the lips of leaders in Washington is that the United States of America has had 38 years of consecutive trade deficits. Our current account deficit is 10 times worse than the worst country in Europe. The EU as a whole carries a $32 billion trade gap with the world which sounds large until you realize that the United States of America has a trade deficit of $600 billion annually. So the question needs to be asked, how is it that a continent stocked full of high cost socialist governments, scarce natural resources, expensive energy prices, speaking 23 languages, and with a 200 year history of intra-continental war, can out-produce and out-ship the United States of America. Aren’t we the most innovative entrepreneurial land on earth? Are we not the land of Facebook, Google, Microsoft, and Under Armour?
If you ask many of today’s leaders they will tell you that the new order of the day is an economy based on services, or they may tell you that manufacturing has left and will never come back. Some will say the cost of manufacturing in this country is just simply too high. Has anyone told LEGO’s, made in Portugal, or Playmobile, made in Germany that costs are too high? With 300 million people in this country why was it considered impossible to find a few hundred willing to work for reasonable wages so we could outfit our Olympic athletes in clothes made in the USA?
It is time for a reset. As a country we need to reflect upon the structure of how we operate and then begin to make the necessary structural changes – regardless of the blow-back from those seeking to benefit from the status quo. There are many things that need changing as America’s issues are not the result of just one or two burdening policies, but many small issues that together can seem overwhelming. The Chinese call this death by 1000 cuts and we can’t allow this paralysis to threaten the future of our country.
Complicated tax rebates, loans, grants, and special incentive programs while well intentioned, are actually a burden to business, especially small businesses that don’t have the resources to handle them. A business that is losing money cannot use a tax deduction when it is already losing money. What business in America needs are not specialized manufacturing technology centers and special start-up technology programs, what a thriving economy needs is simplification.
An entrepreneur to be successful must focus. They cannot be distracted with complicated tax codes, layers upon layers of insurance protections, human resource processes, burdensome licensing and environmental regulations, and complicated legal contracts. When an organization reduces operational processes it increases efficiencies which in turn creates the necessary focus on providing a better product or service.
Starting a business with core knowledge is not as difficult as some may think. However, growing a business to any substantial size is exponentially harder. Once a business grows to $40 million or 100 people it becomes subject to a bevy of interstate and intrastate rules and regulations that don’t affect smaller businesses. Most companies are completely unprepared both financially and operationally to handle the overwhelming onslaught of regulatory obligations that come when a company achieves these new milestones. It is my opinion that this is one reason you rarely see new small manufacturers opening production plants in the US. The labor regulations, the environment regulations, and necessary permits are just the beginning.
If none of these regulations stunt the growth of a new manufacturer, the product and worker liability burden will surely take a huge bite out of any potential profits. For in America, where companies are not reimbursed for successfully defending themselves in court, the cost of unwarranted litigation is a serious threat. With over 1.2 million licensed legal professionals in America, frivolous litigation is rampant.
We need to be able to stop pandering to the entrenched interests and start creating visibility to the obstacles of business then remove them one at a time. This is not as difficult as it sounds. What is difficult is finding those with the courage to get this done.
Jay Steinmetz, CEO of Barcoding Inc. is a Member of the Maryland Small Business Commission
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